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The Decline of Ricardian Economics in EnglandAuthor(s): Ronald L. MeekReviewed work(s):Source: Economica, New Series, Vol. 17, No. 65 (Feb., 1950), pp. 43-62Published by: Blackwell Publishing on behalf of The London School of Economics and Political Scienceand The Suntory and Toyota International Centres for Economics and Related DisciplinesStable URL: http://www.jstor.org/stable/2550179 .Accessed: 28/02/2012 17:12

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19501

The Decline of Ricardian Economics in England

By RONALD L. MEEK

Much damage has been done to the study of the history of economic thought in this country by the general adoption of what may be called a teleological approach to the work of the Classical economists. Modern historians too often tend to be. interested not so much in investigating the particular problems which their predecessors believed to be important and the reasons which motivated them in their choice of weapons to attack these problems, as in tracing the genealogies of modern theories and supplying them with respectable pedigrees. We seem to find it extra- ordinarily difficult to escape for a moment from contem- porary prepossessions and problems and to imagine an age in which a number of the basic questions at issue, and even the " economic problem. " itself, were different from those of our own time. We sometimes tend to suggest, for example, that the absence from the Classical system of some particular doctrine which we to-day regard as vitally important must necessarily have hindered that system from performing the tasks which it set out to perform; and even more often we imply that if such a doctrine does appear in the Classical system it must necessarily have assumned the same degree of importance in that context as it does in its present one. We visualise economic theory, in other words, as evolving almost purposively towards its present state. This article, which criticises certain modern accounts of the development of " Ricardian " doctrines in England, is intended priinarily as a criticism of the teleological approach which lies behind these accounts.

Most historians of economic thought have laid considerable stress on the tlheoretical innovations of the 1870s Os marking the real dividing line between Classical political economy and modern economics, and have tended to treat the pioneer work of the amazing decade following Ricardo's death as little more than a flash in the pan. Even Professor Seligman

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seems to have believed that this work had very little influence upon the intellectual climate of the time1; and Miss Bowley, who has recently called so emphatically for a revision of the traditional interpretation of the period, still appears to maintain that an " orthodox Ricardian " school flourished in England from the death of Ricardo to the time of J. S. Mill's recantation of the wages-fund doctrine-even if another more heterodox line of economists was at the same time engaged in research in different directions.2 Even when it is not suggested that " Ricardianism " was successful in conquering the whole of the territory, it is usually implied that its victory was complete in those areas where it did conquer. It is agreed that certain " modern " concepts were formulated by a few economists before the I870s, but it is generally denied that they exercised any significant influence on the pure " Ricardian" strain until the time of the Mengerian revolution.

Since the publication of the General Theory, with its suggestive redefinition of "Classical" economics, a new basis for the interpretation of the post-Ricardian period has been discovered. Early in the General Theory, it will be remembered, Keynes comments upon the disappearance of the " great puzzle of Effective Demand " from economic literature after Ricardo's time. " The completeness of the Ricardian victory", Keynes writes, "is something of a curiosity and a mystery ". The well-known remarks which follow this statement were presumably intended to refer specifically to Say's Law rather than to the Ricardian system as a whole, but there is no doubt that Keynes regarded Say's Law as " fundamental to the Ricardian economics ",

as the very essence and basis of the Ricardian system.3 From Keynes's point of view, the great divide between Classical and contemporary economics occurred not in the 1870s, but in I936.

This identification of Ricardian economics with Say's Law was a useful and striking pedagogical device. It was designed to emphasise the most significant feature of Keynes's own contribution, and it succeeded admirably in its purpose. But to use it, as Mr. Checkland has recently done,4 as the basis for a re-interpretation of the early post-Ricardian

I "On Some Neglected British Economists ", Economic Journal, 1903, pp. 534-535. 2 Nassau Senior and Classical Economics, 1937, passim. 3 General Theory, Ppp 32-33 and footnote to p. 3. 4 " The Propagation of Ricardian Economics in England ", Economnica, February 1949.

1950] THE DECLINE OF RICARDIAN ECONOMICS 45

period, is surely an example of the teleological approach at its most extreme. Mr. Checkland assumes without question that Say's Law was in fact " the basic premise of the New School " and proceeds to discuss the propagation and ultimate victory of the doctrines of the school in terms of the tactical and strategic advantages enjoyed by those who believed in the truth of Say's Law. If Mr. Checkland had been concerned only to account for the early victory of Say's Law over Malthus's underconsumptionist doctrine there might have been much less to complain of in his article, but it is fairly clear from his language that he is in fact trying to account for the victory of the " Ricardian " system as a whole.

Was Say's Law actually the basic premise of the Ricardian school ? There is, of course, no doubt that the new school regarded Say's Law as extremely important. Ricardo selected Say's chapter " Des Debouches " for special com- mendatory mention in a footnote to the preface of his Principles,1 and McCulloch described the doctrine of the dependence of effective demand upon production as Say's "principal merit in a scientific point of view ".2 But to show-what indeed is obvious-that Ricardo and his disciples regarded Say's Law as a very important principle is not to show that it was the " basic premise " of the school or to justify the identification of which I am complaining. The first part of what follows is designed to throw doubt on the assumption that we can say anything really useful about the development of Ricardo's system as a whole after 1823 merely by accounting for the survival of this one particular doctrine. The second part outlines a different approach to the problem.

Ricardo's attention had been drawn to the significance of what he then called " Mr. Mill's principle " at least as early as I84 when, in the formative period of his mature thought, he was arguing with Malthus over the effect upon profits of restrictions on the import of corn. Maltbus appears to have affirmed early in the debate, as against the "com- mercial "3 viewpoint which Ricardo was defending, that

I Works (McCulloch's edition), p. 6. 2 The Literature of Political Economy, p. zi.

3 Cannan : Theories of Production and Distribution, p. 164.

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restrictions on import would not lower the rate of profit " if the consequence of such restriction be a great reduction of capital ".1 Ricardo, arguing from different political pre- mises and not easily overawed by the authority of Adam Smith, replied that the effect upon the rate of profit of restrictions on import must be considered independently of the effect of a reduction of capital, since " there is no necessary connection between these two operating causes, as they may at the same time be acting together or entirely in opposite directions ".2 So far as the second cause was concerned, Ricardo agreed with Malthus that " when capital is scanty compared with the means of employing it, from whatever cause arising, profits will be high l"3 but the two men were not agreed on the reason fcor this inverse relationship between capital accumulation and the rate of profit. It wvas out of their controversy around this problem that the new Ricardian system eventually emerged.

Malthus suggested that if restrictions on import brought about a considerable diminution of capital, the effect of this diminution upon profits would probably be sufficient to neutralise the opposite effect of any rise in wages which might result from the restrictions. The " proportion of demand to supply" might continue to increase, so that profits would not necessarily fall. Ricardo admitted that "capital and produce may diminish faster than demand" in the short period, but contended that in the long run "effective demand cannot augment or continue stationary with a diminishing capital .4 Some time early in September, I8I4, Malthus appears to have shifted the argument on to a more general plane, probably relating the issue directly to the version of Say's Law put forward by James Mill in his Commerce Defended. On September i6th Ricardo wrote as follows: ", If you think that, with an increase of capital, men will become indifferent both to consumption and accumulation, then you are correct in opposing Mr. Mill's idea, that in reference to a nation supply can never exceed demand ". But, Ricardo argued, there was actually no reason why effective demand should not increase part passu with capital, since the wants and tastes of mankind were unlimited. "We all wish to add to our enjoyments or to

1 Letters of Ricardo to Malthus, pp. 35-36 (letter of 25.7.14). 2 Ibid., p. 36. 3 Ibid., p. 43 (letter of I6.9.I4). 4 Ibid., p. 39 (letter of I1I.8.14).

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our power. Consumption adds to our enjoyments, accumula- tion to our power, and they equally promote demand."' Malthus, however, continued to contend that accumulation might influence profits more directly than Ricardo supposed

by increasing the supply of commodities to such an extent that the effective demand was insufficient to absorb the whole supply.

Ricardo recognised that the problem was a crucial one. It is very important ", he wrote, " to ascertain what the

causes are which make capital scanty compared with the means of employing it.... It is in this inquiry that I am led to believe that the state of the cultivation of the land is almost the only great permanent cause."2 The state of the cultivation of the land, he argued, is " almost the sole cause which regulates the profit of stock and the means of advan- tageously employing capital ".3 And by December, 1814, the place of accumulation in the new Ricardian system had been made quite clear:

"Accumulation of capital has a tendency to lower profits. Why ? because every accumulation is attended with increased difficulty in obtaining food, unless it is accompanied with improvemnents in agriculture; in which case it has no tendency to diminish profits. If there were no increased difficulty, profits would never fall, because there are no other limits to the profitable production of manufactures but the rise of wages. If with every accumu- lation of capital we could tack a piece of fresh fertile land to our Island, profits would never fall."4

Here the skeleton of the system of the Principles is clearly displayed. Flesh and spirit are still wanting, but by the time of the publication of Ricardo's essay on the profits of stock both had been supplied. The flesh consisted of the new theory of rent, towards which Ricardo himself had obviously been groping during the later months of 1814. The spirit-the central principle of the whole system-was the labour theory of value, to w-hich Ricardo was coming to attach ever-increasing importance.

It appears from this correspondence that the inain role of " Mr. Mill's principle " in the early formulations of

I Ibid., pp. 43-45. Cf. p- 49- 2 Ibid., p- 43- 3 Ibid., p. 46 (letter of 23.IO.14). 4 Ibid., p. 53 (letter of i8.IZ.14).

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Ricardo's system was to confirm the theory that "the increased difficulty of obtaining food " was the only permanent cause of a fall in profits. Accumulation certainly influenced profits-but only per medium of a rise in wages. Malthus, on the other hand, was concerned to prove that accumula- tion might also react upon profits directly per medium of a failure of effective demand. Ricardo defended Say's Law primarily because it provided corroborative evidence in favour of his own view. In his essay on the profits of stock he felt sufficiently sure of himself to put forward his own doctrine quite dogmatically, without specifically adduc- ing Say's Law in his defence or noticing Malthus's objections. And even in the Principles, where Ricardo discusses Say's Law at some length in relation to Smith's theory of profit, its subordinate place in the basic theoretical structure is made fairly clear. " From the account which has been given of the profits of stock ", Ricardo writes at the beginning of the chapter entitled " Effects of Accumulation on Profits and Interest ", " it will appear that no accumulation of capital will permanently lower profits, unless there be some permanent cause for the rise of wages ". Ricardo clearly believed that Smith and Malthus had already been refuted by the theory of profit outlined in the preceding chapters, where Say's Law had not been mentioned. But Say's Law was such a convenient weapon (and, as will be seen later, had such useful political connotationis) that Ricardo could not resist using it as a reply to Smith. "Adam Smith ", he says,

". . . uniformly ascribes the fall of profits to the accumulation of capital, and to the competition which will result from it, without ever adverting to the increasing difficulty of providing food for the additional number of labourers which the additional capital will employ. ... M. Say has, however, most satisfactorily shown that there is no amount of capital which may not be employed in a country, because demand is only limited by production. * . . There cannot, then, be accumulated in a country any amount of capital which cannot be employed pro- ductively, until wages rise so high in consequence of the rise of necessaries, and so little consequently remains for the profits of stock, that the motive for accumulation ceases?'1l

I Works, pp. 174-175.

I950] THE DECLINE OF RICARDIAN ECONOMICS 49

As his system developed, and particularly as his theory of value began to assume its central position, Ricardo became more and more convinced of the importance of insisting that a rise in wages was the sole cause of a fall in profits. This view was intimately bound up with his belief that value relations in the market ultimately reflected the social relations between man and man in the productive process, and with his conviction that the productive process could be adequately described in terms of human labour without postulating any other " factor of production ". As Mr. Dobb has pointed out, the statement " when wages rise, profits fall" appears on the surface to be nothing more than a tautology. But as employed in Ricardo's system it implied that " profit is uniquely determined by the ratio of the value of labour-power to the value of commodities in general " -a ratio which is approximately equivalent to " the pro- portion of the labour-force of society which requires to be devoted to the production of the labourers' subsistence ".1 It follows from this that nothing can permanently lower the rate of profit which does not increase the quantity of social labour which it is necessary to allocate to the wage- goods industries relatively to the quantity allocated to the non-wage-goods industries. Obviously the accumulation of capital -will not affect this ratio unless it is associated with increased difficulty in obtaining food-which Ricardo believed would normally be the case. In defending his new theory of profit against Malthus's critique, Ricardo was defending a view of the nature of the economic problem which was of vital importance in his theoretical structure.

It is true, of course, that Ricardo's theory of profit was directly based on his theory of value, and that the latter rested upon the assumption that demand could be con- sidered as a dependent variable in a first approximation to reality. If we take " Say's Law " to be virtually equivalent to this assumption, then we must admit that " Say's Law " in this sense was fundamental to the Ricardian system. But it seems fairly clear that the new school regarded Say's Law as possessing a significance much beyond this. The proposition that demand can safely be treated as a dependent variable in the basic theoretical framework is by no means the same as the proposition that demand in the real world is so closely linked with production that there cannot possibly

1 M. H. Dobb: Political Economy and Capitalism, p. 46.

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be a general glut of commodities. It is perhaps significant in this respect that James Mill, in his reply to Spence, should have demonstrated in one place that the part of income destined to be used as capital " is just as completely consumed, as that which is destined for immediate gratification ",1 and then, a few pages further on, introduced the idea that " the production of commodities creates . . . a market for the commodities produced "2 as if this were something quite unrelated to his previous argument. The real impor- tance of Say's Law to Ricardo, as to Mill, lay in the fact that it provided a plausible answer to the contention that " there is only a market for a given quantity of commodities, and if you increase the supply beyond that quantity you will be unable to dispose of the surplus ".3 Looked at in this way Say's Law appears more as something superimposed upon the Ricardian framework than as its " basic premise ".

It is quite understandable that Ricardo should have seized upon Say's Law for assistance in the defence of his theory of profit and in the counter-attack on Malthus's theory of the general glut, when so much was obviously at stake. Once admit that profits could be affected by any factor other than a variation in wages and Ricardo's whole theoretical structure came tumbling to the ground. And once admit that profits might be lowered as a result of accumulation, and the way was immediately laid open for serious criticism of the economic system. Ricardo was never particularly concerned to defend the interests of any single social class except in so far as the interests of that class happened to be bound up with an increase in production,4 but it would hardly have been possible for his attitude towards the economic system itself not to have been to some extent apologetic. Although the institutional foundations of the system had not yet been seriously called into question in Britain, a tendency was already apparent to explain certain manifest defects in the working of the system in terms of the operation of factors external to it. The appalling

1 Commerce Defended, pp. 71-72. Mill was here answering Spence's contention that national prosperity depended upon the maintenance and increase of the landlords' demand for luxury goods. The traditional ex post concept which Mill put forward in reply was, of course, sub- sequently reformulated in ex ante terms and used (quite unjustifiably) as evidence in favour of Say's Law (e.g., by Ricardo, Works, p. 175). It is not true, however, that the concept itself necessarily involved Say's Law, any more than the Keynesian equality between savings and investment involves it to-day.

2 Ibid., p. 8I. 3 Ibid., p. 8o.

Cf. Marx, Theorien (French Edition), Vol. 4, p. I1.

1950] THE DECLINE OF RICARDIAN ECONOMICS 51

poverty among the lower orders, for example, was explained by means of the Malthusian theory of population. A more difficult problem was set by the mysterious " tendency of the rate of profit to fall". If the rate of profit tended naturally to fall as society progressed, and if capital accumula- tion depended (within certain limits) on the rate of profit, then a boundary seemed to be set to the expansion of social welfare. If accumulation was necessarily attended by the destruction of the motive to accumulate, how could this state of affairs be explained without impugning the system itself ?1 Ricardo might insist that the stationary state was not a state of stagnation,2 and that in any event it would not be reached for a very long time, but the doubt remained. Here again an external factor-in this case Nature-was brought in by way of explanation. Not even the best of all possible economic systems could overcome the obstacle of diminishing returns. To economists thinking almost instinc- tively in such terms, Malthus's suggestion that the system itself was internally defective-if only in the sense that its continued progress required the existence of a vast horde of idlers-must have come as something of a shock,3 and it is hardly surprising that all the available weapons, including Say's Law, should have been employed against such a major heresy.

What requires explanation is not so much Ricardo's enthusiastic support for Say's Law as his insistence that it was fully operative even in the short period. Little damage would have been done to Ricardo's system by a recognition of the fact that over-accumulation might occasionally cause a temporary fall in profit-provided, of course, that the existence of effective long-run corrective tendencies was also recognised. Ricardo's advocacy of a rigid version of Say's Law seems to have been associated with his desire to defend certain political conclusions suggested by his theory. In his I 8 I 5 essay he had argued that there were two important counteracting factors which might hinder the long-run tendency of the rate of profit to fall-agricultural improve- ments and a fall in the price of imported corn.4 But both

' Cf. M. H. Dobb: op. cit., pp. 82-83. 2 Letters to Malthus, p. I89 (letter of 2I.7.2I). 3 Ricardo several times complains that Malthus sees " great evils in great powers of produc-

ti9)n" (e.g., Letters to Malthus, p. I88). Ricardo's tone in some of these passages shows how seriously his moral conscience was shocked by Malthus's critique.

V Works, p. 379. Cf. M. H. Dobb: op. cit., p. 87.

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improvements (at least in the short run) and an abolition of restrictions upon importation were against the interests of the landlords, since they each led directly to a fall in rents. Thus the theory that profits depended solely upon the value of food implied that " the interest of the landlord is always opposed to the interest of every other class of the community ", since the interests of the other classes obviously lay in checking the " natural " fall in profits as far as this was possible. There is little doubt that Malthus's desire to find an alternative theory of profit which did not involve this unfortunate political conclusion was at least partly responsible for his contention that profits might fall, even though improvements were encouraged and the Corn Laws repealed, if production outstripped consumption. The important point seems to be that Ricardo believed Malthus to have asserted, not only that this might happen, but also that it latterly had happened.1 The question at issue, then, was not only an academic one: it was related directly to the thorny problem of the cause of the present distresses. If Ricardo were correct, it followed that the actions of those of his contemporaries who were at that time fighting in various ways to weaken the influence of the land-owning interests were supported by the new science of political economy. If Malthus were correct, on the other hand, it followed that they were simply wasting their time. Indeed, their actions might be positively harmful, since if the existence of a class of unproductive consumers was a permanent institutional necessity, then so far from the interests of the landlord being always opposed to those of the rest of the community, the economic health of the rest of the community actually depended upon the wealth and idleness of the landlord. Ricardo and his disciples tended to insist that Say's Law was operative in the short run because in the long run the participants in the contemporary political struggle would all be dead.

It is true, then, that Say's Law was of great importance to Ricardo and his followers. But it was hardly the " basic premise " of the new school, and an approach which seeks to interpret the history of economic thought in the post- Ricardian period in terms of the victory of Say's Law alone is not likely to prove very fruitful. Obviously some of Ricardo's doctrines survived for many years after his death

I Cf. Letters to Malthus, p. i86 (letter of 9.7.21).

1950] THE DECLINE OF RICARDIAN ECONOMICS 53

whereas others virtually perished with him, and any inter- pretation of the work of his successors, if it is to be meaningful, must account for the defeats as well as for the viCtories. We have to ascertain not only why Say's Law succeeded, but also why, for example, the labour theory of value (at least as Ricardo formulated it) did not

II

In Ricardo's own mind there was little doubt as to what constituted the " basic premise " of his system. " I confess it fills me with astonishment ", he wrote to Malthus in i8i8, " to find that you think . . . that natural price, as well as market price, is determined by the demand and supply. . . . In saying this do you mean to deny that facility of production will lower natural price, and difficulty of production raise it ? . . . If indeed this fundamental doctrine of mine were proved false I admit that my whole theory falls with it."l By this time Ricardo was fully aware of the crucial position a theory of value must hold in any coherent theoretical system, and had seized upon human labour as the substance, and the only possible measure, of that " facility of produc- tion " which determined natural price. It was by no means an easy task for an economist at this time to emancipate his thought from the traditional notion that labour con- tributed value to its product only per medium of the wages paid to it; and Ricardo was virtually the first to fashion anything like a consistent theory of value from the notion that it was not the capitalist's expenditure on subsistence goods for his workmen but the expenditure of energy by the workmen themselves which conferred value on com- modities.

Behind this fundamental principle there lay a profound sociological assumption. If we have decided to treat demand as a dependent variable and to think of exchange value in terms of cost, there are certain striking aspects of the relation- ship between modern man and his environment which are likely to induce us to select the expenditure of labour power as the primary and most essential form of cost. fn a pre- dominantly agricultural economy there may well be a tendency for both labour and land to be conceived as equally 6 active 9 factors in the productive process-labour because

1 Letters to Maltbus, pp. 148-149 (letter of 30. i I8).

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it appears to be the indispensable initiator of that process and land because of the " activity" displayed by the re- generative powers of the soil. But in an industrial economy, where by the aid of " ingenious labour " man is able to produce an abundance of material wealth undreamed of in former times, nature begins to be conceived, not as an active co-partner in the business of getting a living, but as little more than a passive sleeping partner.' In manufacture it is immediately obvious that man is the dominant partner, but in agriculture nature does not yield her former authority without a struggle. The continued existence of rent seems to prove that nature still " labours along with man " in the fields and pastures. But when it is demonstrated that the existence of rent is due not to nature's beneficence but to her niggardliness, that such assistance as she does give is given in all occupations and not in agriculture alone, and that in any event it is given freely, without any cost to man-then the expenditure of human labour is revealed as the only fundamental form of cost or sacrifice common to all branches of production. Human labour begins to appear as the basic, universal and active cost element, always to be found in operation when productive activity results in a value difference between input and output. It seemed to Ricardo that the whole process of production could and should be explained in terms of the disposition and expenditure of the labour power of society. The stock of land was given and unalterable: its existence had cost society nothing. The cost of capital goods could be reduced to the quantity of labour expended upon their production in the past. The expenditure of human labour power remained as the basic social cost. The value of the gross national product, then, could be measured by the quantity of living and dead labour embodied in it. To replace this expended labour cost society the amount of labour which it was necessary to devote to the production of subsistence goods for the labourers.2 The difference between these two quantities of labour measured the net social gain-the surplus or net revenue-resulting from productive activity.

The most significant feature of the decade immediately following the death of Ricardo is the extraordinary speed

1 Petty's aphorism-" Labour is the Father and active principle of Wealth, as Lands are the Mother "-was probably intended to cxpress this meaning.

2 The earlier Classical economists tended to ignore the complication afforded by the deprecia. tion of fixed capital,

I950] THE DECLINE OF RICARDIAN ECONOMICS 55

with which these fundamental concepts were removed from the agenda of economic discussion. The years from 1823 to I833 saw the popularisation (and vulgarisation) of Ricardo's teachings by people like James Mill and McCulloch; they saw the use of Ricardian concepts by radicals and social critics; and they saw the attacks on Ricardo made by a number of those " neglected economists " of whom. Professor Seligman reminded us in I903. By the later 'twenties the most important question was not so much whether Ricardo or Malthus was to prevail on the glut question, as whether Ricardo's system as a whole was to be completely abandoned to the radicals or inoculated against misuse by these individuals by the injection of certain suitable amendments. After a series of energetic contro- versies " Ricardianism " emerged as the victor over miost of the field-but it was hardly the Ricardianism of Ricardo. The basic premise of the system had been thrown overboard. As early as I829 Samuel Read could refer to " the almost universal rejection of labour as the standard "31; and in i83I Cotterill stated that he felt himself obliged to repeat the usual arguments against the labour theory only because he suspected that " there are some Ricardians still remaining ",2

Ricardo, as Read acutely observed, had believed that " the idea of value in commodities cannot even be conzceived without being mingled with the idea of their relation to mankind and to human labour, of which some portion must always be employed in procuring them originally ".3 It was this vital concept which virtually vanished from English political economy after Ricardo's death. McCulloch was almost the only economist to continue to defend Ricardo's theory of value after i 826, and his defence contained a number of bizarre elements which afforded an easy target for critics.4

Interesting evidence of the rapid decline of certain basic Ricardian doctrines is to be found in the proceedings of the Political Economy Club. If, as Mr. Checkland suggests, the founding of the Club was an act by which the " excellent

I Samuel Read: An Inquiry into the Natural Grounds of Right, etc., p. 203.

2 C. F. Cotterill: An Examination of the Doctrine of Value, etc., p. 8. 3 Read: Inquiry, p. viii, footnote (Read's italics). 4 In much of his work on value and profit theory McCulloch seems to haarc been relatively

unaffected by the contemporary drift towards apologetics. But in his attitude towards a number of other matters which Ricardo considered of great importance he definitely deserted the Ricardian camp--e.g., the machinery question, the distinction between pro- ductive and unproductive labour, and the question of the conflict of class interests. Cf. Letters to McCulloch, p. 136; and see also the Centenary Volume of the Political Economy Club (Vol. VI, 192I), p. Z54.

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tacticians " of the new school sought " to consolidate their advantage ", one can only say that they were not very diligent in following up this " political act ". Early in 183i, Torrens put forward the following question for dis- cussion: "What improvements have been effected in the science of Political Economy since the publication of Mr. Ricardo's great work; and are any of the principles first advanced in that work now acknowledged to be correct ? " The question was debated on January i3th and April i5th, I83I, and Mallet has left us an account of the discussions. Torrens apparently held at the first meeting " that all the great principles of Ricardo's work had been successively abandoned, and that his theories of Value, Rent and Profits were now generally acknowledged to have been erroneous ". Bailey had settled the question of value and Thompson that of rent; and Ricardo's omission to take account of the replacement of fixed capital " was decisive of the un- soundness of his views " on profit. McCulloch agreed that Ricardo's theory of profit was defective, but energetically defended his theories of value and rent. Tooke supported Ricardo only on the question of rent. At the adjourned meeting it seems to have been generally admitted that Ricardo's theories of value, rent and profit, although incorrect " according to the very terms of his propositions ", were " right in principle ". There foHows in Mallet's account an important catalogue of Ricardo's errors:

" He is one of the first who has treated the subject of Taxation, and he always reasons out his propositions, whether true or false, with great logical precision and to their utmost consequences ; but without sufficient regard to the many modifications which are invariably found to arise in the progress of Society. One of the errors of Ricardo seems to have been to have followed up Malthus' principles of population to unwarrantable conclusions. For, in the first place it is clear from the progress of social improvement and the bettering of the condition of the people in the greater part of the civilised world, that Capital, or the means of Employment-the fund for labour-increases in a greater ratio than popula- tion; that men generally reproduce more than they consume, and the interest of the capital besides, which surplus goes to increase the fund for labour. Then he

1950] THE DECTINE OF RICARDIAN ECONOMICS 57

looks forward from the gradual demand for food and the use of land, to the gradual lowering of wages and profits till nothing remains but rent to the Landlords. But long before that, modification would take place in the state of society which would make such colnclusions all wrong. First of all, it is contended that the interest of the Landlords does in fact coincide with those of the other classes ; and then we see that in Ireland, where rent is absorbing everything, in consequence of the immense competition for land, a system of Poor Laws is likely soon to equalise the division."'

What was the reason for the rapid decline of these funda- mental Ricardian concepts-a decline suggested not only in this debate, but also in the mass of economic literature which flooded the market at this time ? The early reaction against Ricardo, I think, was in large measure due to a widespread feeling that important elements of his system set limits to the prospects of human progress under capitalism, and therefore could not possibly be true. In particular the work of the " Ricardian socialists " revealed certain disharmonious and pessimistic implications of Ricardo's system so forcibly that the economists of the day could hardly avoid being influenced by it in the course of their revaluations of Ricardo.

A significant number of economists was at this time becoming conscious of the fact that the labouring classes were beginning to think for themselves and to question the ethical validity of the foundations of the social structure. In his Elements of Political Science, published in I814, John Craig could remark that " the fear of levelling is altogether chimerical ".2 In the first edition of Mrs. Marcet's Con- versations (I8i6) we find Mrs. B. denying that she would teach political economy to the labouring classes.3 Yet only ten or twelve years later Mrs. Marcet is to be found vying with Harriet Martineau in the composition of economic fairy tales of a wholesome moral character for the enlighten- ment of the proletariat. It would appear that it was not Mrs. Marcet who changed in the intervening years, but rather the labouring classes themselves. So long as the

I Centenary Volume of the Political Economy Club, pp. 35, 36 and 223-225. 1 am indebted to Professor Hayek for drawing my attention to these passages.

2 John Craig, Elements of Political Science, Vol. II, p. 230. 3 Conversations on Political Economy, p. I58.

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labouring classes are passive and ignorant their views on political economy can be ignored. But when it becomes no longer possible to prevent them from listening to Mr. Hodgskin at a Mechanics' Institute the situation has radically changed. The fear of levelling is no longer chimerical. Evidence that the seriousness and importance of this change were widely appreciated is to be found in the works of many economists of the period, but by no one were the facts more cogently stated, and the new tasks facing political economy more admirably summarised, than by Mountifort Longfield in 1833

"It is daily becoming more important, that the notions which are generally entertained should be correct, since

they now lead so directly to action. . . . No person can now remain altogether neutral, and avoid such topics. He must, according to the degree of pains he has taken with the subject, be a teacher of useful truth, or a dis- seminator of mischievous falsehood. Opinions . . . exercise immense influence on a class of people formerly removed beyond the reach of such discussions .... I allude to the labouring orders, both agricultural and manufactural. It is no longer a question, whether these men shall think or not, or what degree of influence their

opinions ought to exert over their conduct; they will follow the path where they conceive their interests to point, and it only remains to be considered, in what manner a true sense of their real interests may be most effectually brought home to them. The change has taken place, whether for the better or the worse it is useless now to

enquire, since the steps which have led to it can never be retraced. The people will no longer be guided by the

authority of others.. It depends in some degree upon every person present, whether the labourer is taught that his interest will be best promoted by prudence and

industry, or by a violent demolition of the capital destined for his support."' It is evident, too, that the majority of economists were

very much aware of the dangerous use to which a number of radical writers were putting certain orthodox economic

concepts. To the extent that the arguments of the radicals were taken up by the working-class movement and used as

1 Longfield: Lectures on Political Economy, pp. I6-I8.

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1950] THE DECLINE OF RICARDIAN ECONOMICS 59

weapons in its day-to-day struggles, the claim to the whole produce of labour-or even to a greater proportion of the produce of labour-appeared as a monstrous assault on the very foundations of civilised society. The work of men like Charles Hall and Piercy Ravenstone might be safely ignored; but Hodgskin's Labour Defended, born as it was of the working-class activity which followed the repeal of the Combination Laws, could not be so easily passed over.1 In a number of cases Hodgskin was attacked directly. The American economist Thomas Cooper wrote in r830:

" The modern notions of Political Economy among the operatives or mechanics are stated, but not very distinctly, by Thomas Hodgskin in his treatise on Popular Political Economy .... If these be the proposals that the mechanics combine to carry into effect, it is high tiine for those who have property to lose, and families to protect, to combine in self-defence."2

Charles Knight's edifying work, The Rights of Industry, published in I83I under the superintendence of the Society for the Diffusion of Useful Knowledge, seems to have been aimed directly at Hodgskin and had a very wide influence. Samuel Read obviously considers Hodgskin and others like him who flatter and persuade the workers " that they produce all " as the main enemies against whom his reasoning is directed3; and Scrope finds "truly unaccountable" the blindness of Hodgskin and all others who " declaim against capital as the poison of society, and the taking of interest on capital by its owners, as an abuse, an injustice, a robbery of the class of labourers ! "14

It is hardly too much to say that every new development in economic thought in England about this time had the objective effect of cutting the ground from under the feet of writers like Hodgskin and William Thompson. And at least in some cases there can be little doubt that the critics of Ricardo knew exactly what they were doing and why they were doing it. Scrope, for example, was disarmingly frank about the motives which originally led him to the

1 Francis Place drew attention to the interesting fact that Hodgskin's ideas attracted large numbers of disillusioned Owenites. B.M., Place Add. Mss., 27,791, f. 263.?

2 Thomas Cooper: Lectures on Political Economy, 2nd edition, pp. 350-353. 3 Read: Inquiry, pp. 125-132, xxix, etc. 4 G. P. Scrope : Principles of Political Econony (1833), pp. 150-151. See also the amusing

passage in a review of some of Senior's lectures in the Edinburgh Review, Vol. 48, September 1 8Z8, p. I70 et seq.

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study of political economy. " At the time of the passing of the first Reform Bill ", he wrote in I873, " it became evident that the power of directing the Legislation of Britain was about to pass . . . from the hands of the few into those of the many ". Wishing to estimate the probable results of this change upon " the social destinies of the country ", Scrope endeavoured to ascertain " what were the notions likely to prevail among the masses, when they became the repositories of supreme power, with regard to the principal institutions of modern society ' What lessons in this respect, he asked himself,

were they likely to imbibe from the current doctrines of Political Economy ? Were these lessons fitted to reconcile them to the hardships of a condition of almost ceaseless toil for, in many cases, but a meagre subsistence and this in a country overflowing with wealth enjoyed in idleness by some at the expense (as it might at first sight appear to them) of the labour of others ? On examina- tion of the works of the most noted Economists of that day, Messrs. Ricardo, Jas. Mill, Maculloch, Malthus, Chalmers, and Whateley, I could not discover in them any answer likely to satisfy the mind of a half-educated man of plain commonsense and honesty who should seek there some justification for the immense disparity of fortunes and circumstances that strike the eye on every side. On the contrary, these works appeared to me to contain many obvious inconsistencies and errors, to inculcate many false and pernicious principles, and certainly to be little adapted to the purpose which I looked for in them."'

Approaching political economy in this spirit, it is hardly surprising that Scrope should have been the first British economist to propound a consistent version of the abstinence theory.2 Samuel Read was another who understood perfectly well that Ricardian political economy led logically to radical- ism. His refutation of the " mischievous and fundamental error " of the " Ricardo economists " (i.e., their doctrine that "labour is the only source of wealth ") consists largely of an endeavour to put forward as many apologetic theories of profit as possible, regardless of consistency.3 And Long-

1 Political Economy for Plain People, Preface. 2 Quarterly Review, Jaiiuary I831, Vol. XLIV, p. I8. 3 Inquiry, p. xxix and passim.

1950] THE DECLINE OF RICARDIAN ECONOMICS 6i

field, finally, was surely quite as fully aware of the political and ethical implications of his theory of distribution as was J. B. Clark of his some sixty years later. It seems not unfair to say that economists like Scrope, Read and Longfield, in varying degrees, tended towards the view that if a doctrine " inculcated pernicious principles ", if it denied that wealth under free competition was consigned to its " proper " owners, or if it could be so interpreted as to impugn the motives or capacity of the Almighty, then that doctrine must necessarily be false. Their fundamental approach, in other words, was determined by a belief that what was socially dangerous could not possibly be true.

To say that the work of Hodgskin and his fellows had more to do with the innovations of the period than it is at present fashionable to admit is neither to deny thi-e great originality and importance of some of the new contributions nor to assert that the majority of their authors were consciousil indulging in apologetics. The writings of Bailey, West, Lloyd and Longfield possess an interest and significance which are not purely historical, and remain as important landmarks in a period of great anticipations. But surely something more than mere intellectual curiosity must be postulated to account for the iconoclastic attitude adopted towards Ricardo's system by so many of thle innovators. As I have suggested above, this attitude would seem to have been largely due to a feeling that any theory which suggested that the possibilities of progress under capitalism were limited could not be true. Hodgskin frankly admitted that he disapproved of certain of Ricardo's doctrines because they seemed "to set bounds to our hopes for the future progress of mankind in a more definite manner even than the opinions of Mr. Malthus " 1; and J. S. Reynolds wrote in i822 that " it would not be difficult to trace Mr. Ricardo's theory to consequences inconsistent with the goodness of Providence, and to the scheme of Divine government ".2

An optimistic era in which prosperity appears to be increasing -and in which basic social institutions are coming under fire-has no use for theories which encourage criticism by setting limits. Such theories seem not only to be d'angerous, but also to contradict the actual living experience of the age.

1 Letter to Place of May z8th, i8zo. B.M., Place Add. Mss., 35,I53. 2 J. S. Reynolds: Practical Observations on Mr. Ricardo's Principles, p. 15

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It did not take long for most of the pessimistic theories to fall into disuse. In I835 Mallet reports that " the whole artillery of the Club " was directed against Malthus's principle of population.' As early as I83I, as we have seen, the Club seems to have agreed that the interest of the landlord was not in fact in conflict with the interests of the other social classes, and also that the doctrine of the stationary state required radical amendment. In the early 'thirties it was widely suggested that industrial experience had proved Ricardo's theory of the inverse relationship between wages and profits to be false, since wages and profits might and often did increase together. The Ricardian concepts of value as embodied labour and profit as a surplus value, which had proved so useful to the radicals, were among the first to be rejected: value began to be conceived in terms of utility or cost of production or sometimes (as with Bailey) as little more than a mere relation; and profit came to be explained not as the result of something which the labourer did but as the result of and reward for something which either the capitalist or his capital did. John Stuart Mill, growing up in this new atmosphere, found no difficulty in incorporating Senior's abstinence concept into his system and substituting a rather superficial cost of production theory of value for Ricardo's labour theory. Ricardo's system, in short, was purged of most of its more obviously disharmonious elements, particularly those which might hlave been used to suggest that there was a real conflict of economic interest between social classes under capitalism or that progress under capitalism might be limited for some other reason. Ricardo's disciples, like the later followers of Quesnay, threw overboard their master's most essential principles while still claiming to speak in his name. Say's Law, with its optimistic implications, was one of the doctrines which survived the purge, and it was no doubt largely as a result of these implications that it achieved an importance in the neo-Classical system far beyond that which it possessed in Ricardo's theory.

Glasgow University.

1 The difference between the motives which led to the wide acceptance of the Malthusian theory and those which led to its eventual rejection is very striking.